Smart Answers

When a 'Pop-Up' Shop Makes Sense

It's the time of year when a vacant storefront may morph overnight into a Christmas store, followed by a tax preparation office, then a garden shop. These so-called pop-up retailers date back a decade or more, but the opportunities abound this year in particular, says Deb Purcell, director of client services in the Strategy and Analytics Group at Pitney Bowes Business Insight (PBI).She spoke to Smart Answers columnist Karen E.Klein recently about how small companies can take advantage of low rents and excessive commercial vacancies. Edited excerpts of their conversation follow. What is the "pop-up" concept, and what's driving it this year? It's really an extension of the temporary holiday kiosks you see in regional malls. Small businesses get short-term leases to take advantage of peak season for their product or service, without making a long-term cost commitment. This year, there are historically high vacancy rates, creating an unprecedented buyer's market. Landlords are facing low demand for their vacated spaces, so they're motivated to be flexible in terms of price and time commitments from retailers. The idea isn't new—it's just more visible this year? The idea probably goes back at least 10 years or longer. Back then, the pop-up was all about marketing. You might be a designer in SoHo who had a specific merchandise line. and you were trying to make a splash. Opening a temporary storefront would draw attention to your brand and let you test the concept. Remember, this was also when people still weren't sure they could be entirely successful online without a brick-and-mortar outlet. What makes this opportunity viable for small retailers or startup entrepreneurs? The key is that the retailer must experience a significant known seasonal spike in demand, at least in certain merchandise, and be able to secure a lease during that exact period. Otherwise, the pop-up concept won't make sense. How are you advising entrepreneurs to determine if this concept is right for them? They need to do a detailed cost-benefit analysis. What are your sales projections for the peak period? What's your cost structure? Can you afford to do a marketing blitz that brings customers in quickly? Also, how much will it cost you to set up and tear down the space? Retailers who open long-term locations amortize their setup costs over a five-year period. If you're there for three months, you have to assure that you can absorb that upfront cost and still be profitable. How difficult is it for customers to find a store that's open during such a brief window? In retail, except for restaurants, there's a concept called "maturity." It's the time frame required before a retail concept hits its stride. It takes time—months maybe—for consumers to realize you're there, try your concept, and then adjust their shopping patterns to incorporate your alternative. In a pop-up, that all has to happen very quickly. You have to do really heavy marketing to draw attention and draw people in immediately. That's why when you drive by the pop-up Halloween shops they look very garish. What's the top marketing message right now? In this economy, it's all about emphasizing value. If you're providing something that meets a need, at a certain point in the calendar, and you can get the word out that yours is going to be cheaper, that'll hit the spot. In different economic climate, you might emphasize something different—like quality. Years ago, you said, pop-ups were considered a place to test a new retail concept. Is that still a valid use today? Yes, absolutely. For small businesses, a pop-up location can act as a barometer of potential future success. If sales at the pop-up location exceed expectations, the business has information to support a more permanent deployment. Again, the trick is that the consumer is so value-conscious right now that you may have a concept that's viable in a better economic climate. But today, even with low real estate costs, you won't get the response you're looking for. On the other hand, if you can make it in this climate, the chances are pretty good you can make it anytime.

Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.

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